Indian Markets Can Get Worse Before They Get Better: CLSA’s Chris Wood
Indian markets can get worse before they get better, according to CLSA’s strategist Chris Wood, as a weaker rupee, rising fuel prices and liquidity concerns dragged down stocks.
The long-term Asia portfolio (excluding Japan) was badly affected by a selloff in Indian financial stocks after the default at Infrastructure Leasing & Financial Services Ltd, Wood said. The systemically important infrastructure group’s failure to repay debt triggered fears of a contagion, hurting non-bank lenders stocks the most.
Forty-nine percent of Wood’s investments are in India, dominated by financials that account for 32 percent of his overall portfolio. Due to the selloff in India, Woods said, the model portfolio declined 11.8 percent last quarter compared with a 1.4 percent fall in the regional benchmark.
Indian financial stocks have always been a core part of the portfolio ever since it was launched in 2002, he said. Over the long term, financials, excluding public sector banks, have outperformed the Indian market, Wood said, adding the Nifty Private Bank Index rose 1,295 percent since April 2005 compared with a 413 percent gain in the Nifty 50 during the period.
Wood said CLSA will maintain its long-term allocation to Indian financial stocks due to their performance track record. The brokerage increased the weight of Reliance Industries Ltd., Indiabulls Housing Finance Ltd., GRUH Finance Ltd. and Godrej Properties Ltd. by one percentage point each.
He also advised global investors to remain ‘Overweight’ on energy stocks as crude, according to him, may touch $100-150 a barrel.